Indonesia - Poverty and wealth

At independence, Indonesia was an extremely poor country, and it was not
until after the change in governments in 1965 that any progress was made
in lowering the rate of poverty. In the 2 decades prior to 1996,
Indonesia saw consistent growth, with the official poverty rate falling
from 60 percent to 15 percent. However, not all groups and regions have
benefitted equally, and Indonesia has a highly uneven distribution of
income. The poorest fifth account for just 8 percent of consumption,
while the richest fifth account for 45 percent. Average income today is
about US$650 a year.

GDP per Capita (US$)

Country

1975

1980

1985

1990

1998

Indonesia

385

504

603

778

972

United States

19,364

21,529

23,200

25,363

29,683

China

138

168

261

349

727

Malaysia

1,750

2,348

2,644

3,164

4,251

SOURCE:
United Nations.
Human Development Report 2000; Trends in human development and
per capita income.

Poverty rates have always been higher in the outer islands. The rise of
manufacturing disproportionately benefitted Java, Bali, and Sumatra due
to the better infrastructure of the inner islands. Economic disparity
and the flow of natural resource profits to Jakarta has led to
dissatisfaction and even contributed to separatist movements in areas
such as Aceh and Papua (Irian Jaya). While the new laws on
decentralization (moving more economic and political decision-making to
the outer islands) may partially address the problem of unequal growth
and satisfaction, there are many obstacles to putting this new policy
into practice.

The financial crisis of 1997 had social ramifications by reversing many
of the income-distribution gains made over the previous decades. Though
the enormous informal economy and family-support networks helped soften
the impact of higher unemployment rates, social effects were nonetheless
profound. In a few parts of the outer islands, the devaluation meant
higher prices abroad for export crops such as cloves, nutmeg, cocoa, and
vanilla, but overall, Indonesians suffered from rising poverty, surging
unemployment, reduced schooling and public services, worsening health
and nutrition, more crime and violence, and increased social stress and
fragmentation. While some 15 percent of the population was below the
poverty line before the crisis, an additional 40 million

Distribution of Income or Consumption by Percentage Share:
Indonesia

Lowest 10%

3.6

Lowest 20%

8.0

Second 20%

11.3

Third 20%

15.1

Fourth 20%

20.8

Highest 20%

44.9

Highest 10%

30.3

Survey year: 1996

Note: This information refers to income shares by percentiles of
the population and is ranked by per capita income.

SOURCE:
2000 World Development Indicators
[CD-ROM].

Household Consumption in PPP Terms

Country

All food

Clothing and footwear

Fuel and power
a

Health care
b

Education
b

Transport & Communications

Other

Indonesia

47

3

6

5

14

3

22

United States

13

9

9

4

6

8

51

China

N/A

N/A

N/A

N/A

N/A

N/A

N/A

Malaysia

N/A

N/A

N/A

N/A

N/A

N/A

N/A

Data represent percentage of consumption in PPP terms.

a
Excludes energy used for transport.

b
Includes government and private expenditures.

SOURCE:
World Bank.
World Development Indicators 2000.

people (20 percent of the population) may have since fallen into
poverty.

Inflation has been a particular burden to Indonesia's poorest
citizens. During the late 1990s, the price of rice, the staple food for
most people, leapt from Rp1,000 per kilogram to Rp5,000. In 1998 the
Ministry for Food and Horticulture estimated that about 80 million
individuals were facing food shortages. In Central and East Java alone
over 30 million people were able to afford only 1 meal per day. Eastern
Indonesia, hard hit by drought as well as economic problems, experienced
widespread famine. Due to the rising costs of imports, medicine ran
short and prices doubled or tripled. The International Labor
Organization estimated that the number of Indonesians using public
health services would double in 1998, to 68 percent of the population,
even as the government was under pressure to spend less money on such
health-related public services. It was reported in the press that the
number of women dying in childbirth shot up from 22,000 per million to
35,000 per million in the space of 1 year, due to the lack of money to
transport women to health facilities and to increased anemia levels in
pregnant women.

In 1998 education accounted for 14 percent of household expenditures.
Rising school costs and falling family incomes forced many poor students
to drop out of school. Roughly 5 percent of students did so in 1999
alone, according to official estimates. Enrollments in junior high
schools in Jakarta declined disproportionately in the case of girls (19
percent), as did enrollment in poorer rural areas. In July 1998 the
government launched a scholarship program for the poorest students.
However, to help pay for this program it had to cut funding for high
schools and colleges.

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